Q1How a new venture is assessed to qualify as project finance.

What are the factors that needed to be considered?

Ans- Access to finance is one of the main reasons that infrastructure projects
are not developing faster and the key stakeholders sometimes do not see a
business case for financing. Moreover, lack of know-how and competence of key
stakeholders require a complex multidisciplinary approaches in order to guarantee
project execution .Projects, however, are funded solely on their merits. Although
we do not make claims of 100% success rate in our pursuit of project finance, with
our expertise and experience, our clients enjoy a definite advantage in terms of
getting their projects successfully funded. The following are extremely important
for achieving successful financial closure.

Following factor need to be considered when assessing the

PROJECT FINANCE:

 Debt to equity ratio – A good project would ideally have a low debt-
equity ratio which helps in reducing the cost of the debt, thereby increasing
the net cash accruals. Higher net cash accruals enable the company to build
up sufficient cash reserves for principal repayment and provide a cushion to
the lenders. Principal repayment schedule – The lender endeavors to match
the principal repayment schedule with the cash flow projections while leaving
sufficient cushion in the cash flow projections. One way of safeguarding
lenders’ interests is to negotiate the creation of a sinking fund for this
purpose
 Sinking fund build-up – Build-up of a sinking fund or Debt Service
Reserve Account is usually established in order to safeguard the lenders’
interests. Such a fund entails deposit of a certain amount in a designated
reserve account which is used towards debt servicing in the event of a
shortfall in any year/quarter of the debt repayment period.
 Trust and retention mechanism – In projects, a trust and retention
mechanism is often incorporated in order to safeguard the lenders’ interest.
 The mechanism entails all revenues from the company to be routed to a
designated account. The proceeds thus credited to the account are utilized
towards payment of various dues in a predefined order of priority. Generally,
the following waterfall of payments is established: statutory payments
including tax payments, operating expenditure payments, capital expenditure
payments, debt servicing, dividends, and other restricted payments.
 Business Plan & Pitch Deck
We have been consistently endeavoring to simplify the process of raising
Project Financefor the project promoters and owners across the world. While
discussing Project Finance, the significance of submitting a concise yet
profoundly informative Project Proposal or Business Plan cannot be overestimated.
Fund Providers as well as investors want to see a business plan that is short enough
to engage investor interest and we realize that it is not easy to put a winning
Business Plan in place unless the Business Plan writer has been thoroughly
acquainted with the project right from its inception. There are numerous
consultants who would accept any Business Plan compiled by anyone.
 Risk structure is the prioritization and mitigation of risks after
the identification, assessment, and allocation process is completed. The
project's legal structure is the web of contracts and agreements negotiated
to make financing possible. Financial structure refers to the mix of financing
used to fund a project, which includes equity, short‐ and long‐term loans,
bonds, trade credits, etc. and the cash flows to equity providers and the
lenders. Project Risk Identification, Analysis, Mitigation, and Allocation
 Risk identification
 Risk analysis
 Risk transfer and allocation;
 Residual risk management; Realizing Benefits Of Project Finance

Project finance also permits the sponsors to share the project risks with other
stakeholders. The basic structure of project finance demands that the sponsors
spread the risks through a network of security arrangements, contractual
agreements, and other supplemental credit support to other financially capable
parties willing to assume the risks. This helps in reducing the risk exposure of the
project company.
Q2 Explain in detail the revenue model for Solar PV Project,
Residential Building, Manufacturing Unit and other PPP projects?

Ans- A revenue model is a conceptual structure that states and explains the
revenue earning strategy of the business. It includes the product and/or service of
value, the revenue generation techniques, the revenue sources, and the target
consumer of the product offered.

A revenue model is important for the company’s long-term business projections as

it gives an overview of the company’s current and future potential to earn profits

 REVENUE MODEL FOR SOLAR PV PROJECT

With reference to solar power plant a business model is the method by which
either revenue is generated by selling the generated energy or savings are made by
consuming the generated electricity he unique issues associated with solar projects
result in a highly specialized practice. For instance, the comparatively low technical
risk of constructing and operating a properly sited solar facility, the reliance on
large volumes of mass-produced component parts available in a global market, and
the opportunities for developing distributed generation projects on residential
rooftops and in community solar gardens set solar projects apart from other
electricity-generating projects. Before we touch the revenue model, the cost of
finance has to be reckoned.

A revenue model is a conceptual structure that states and explains the revenue
earning strategy of the solar business. It includes the product and/or service of
value, the revenue generation techniques, the revenue sources, and the target
consumer of the product offered. Revenue can be generated from a myriad of
sources; can be in the form of

1. Commission
2. Markup
3. Arbitrage
4. Rent
5. Bids
6. Data sales
7. Donation
8. Pay-per-user

 REVENUE MODEL FOR RESIDENTIAL BUILDING

Usually a Quantity Surveyor has made a list of materials and services involved in
the building and used the industry 'bible' of rates for the region to establish the
labour price. The materials are usually put out to tender, then the labor is also put
out to tender to capable builders to bid for the work. Smaller companies and jobs
are usually done by calling 3 contractors, interviewing them and asking for their
bid. Calling more than 3 is a waste of time because everyone has heard about the
job and nobody will bid. Sometimes, competing builders will 'take turns' in
overpricing the job so others get it.

 REVENUE MODEL Manufacturing unit

Unit Manufacturing is the production of merchandise using Labour,

materials, and equipment, resulting in finished goods. Revenue is generated
by selling the finished goods. They may be sold to other manufacturers for
the production of more complex products (such as aircraft, household
appliances or automobiles), or sold to wholesalers, who in turn sell them to
retailers, who then sell them to end users and consumers. Manufactures may
market directly to consumers, but generally do not, for the benefits of
specialization. Companies face both internal and external barriers while
adopting simpler business models. From an internal perspective, years of
capital-intensive investments limit a company’s ability to exit current
business models and embrace new ones. Manufacturing companies typically
carry over significant costs from the past. 
 REVENUE MODEL FOR PPP PROJECT
Some PPP projects are funded wholly or primarily through user payments. This is
most common in economic infrastructure sectors. Financial structuring matters
that arise in user-pays PPPs are discussed in section 4.8.

Other PPP projects are funded wholly or primarily through government payments.
This is the case in most social infrastructure projects, but government payments
also occur in many economic infrastructure projects. There are several reasons for
this. For some forms of economic infrastructure (such as rail transport or water),
a PPP project may be just one component of a broader network or service that is
operated by another entity (the incumbent operator) and the user is paying that
operator for the final service (transportation, water supply to homes). Examples
are HSR projects in Europe (mainly in France and Spain), or WWTP and purification
plants where the water is taken off by a public water authority that operates the
service;

A revenue model is how a business makes money. Residential unit is clear in terms
of money differential compared with main utility charges. Manufacturing is based
generally on cost plus profit concept. PPP model will depend on cost of finance and
the instruments/contributing elements.

Q3 What should be the additional points that needed to be

included in a financial model, if the financing bank is from abroad
and the debt is in US$ but revenue is in INR.

Ans- If the Financing bank is from abroad and the debt is in US$ but revenue is
in INR it means the firms borrows fund from foreign lenders here is USA and it
has to be repaid and this is the situation of External debt in the financial model
this is the additional points that needs to be included

External debt is the portion of a country ‘s debt that is borrowed from the
foreign lenders, including commercials banks, government’s, or international
financial institution. These loans, including interest, must usually be paid in the
currency in which the loan was made to earn the needed currency; the borrowing
country may sell and export goods to the lending country.

External debt sometimes referred to as foreign debt, corporations as well as

governments’ can procure external debt. In many cases external debt takes the
form of a tied loan, which means the funds secured through the financing must be
spent in the nation from the country that provided the loan.

External debt particularly tied loans, might be set for specific purposes that are
defined by the borrower and the lender. For example;- if a country needs to build
up its energy infrastructure it might leverage external debt as part of an
agreement to buy resources, such as the material to construct power plant in
underserved areas.

US dollar denominated debt continued to be the largest components of India’s

external debt, with a share of 53.7% at end-March 2020. Followed by the Indian
rupee 32.9%. India debt service payments are eithin manageable limits by the debt
service ratio to current receipts of Balance of Payments of 6.4% in 2018-19, down
from 7.5% in the previous year.